I've believed all along that this presidential campaign would be neck and neck all the way down to the wire, and early indicators seem to bear that out. Pundits can blather about this so-called "issueless" campaign, but this election will be won or lost on issues. Al Gore knows it, and his strategy is to wage class warfare and offer voters a clear vision of "tax-credit social engineering."
George W. Bush can't just "narrow the differences and run on personality," nor can he just run against Bill Clinton or against Gore's personality, especially with Al going into attack mode, or as we old quarterbacks used to say, a "blitzing scheme."
When a quarterback confronts a blitz - and that's exactly what Bush is facing from Gore - it makes most sense not to try to run; instead, you've got to step up into the pocket and throw deep.
As of now the Bush-Cheney ticket is failing to sell tax-rate reductions in a compelling manner. The simple message is this: Lower tax rates create jobs and wealth and bring in new revenues. A lot of those new revenues come from the rich because they pay an extraordinary share of the tax burden: According to the Tax Foundation, the top 10 percent of taxpayers pay 60 percent of income taxes. That's why cutting rates is such a progressive idea. If you want to get more revenue from the so-called "rich," lower the tax rate and give folks a stronger incentive to invest than to shelter income.
History bears this out. The Coolidge tax cuts of the 1920s brought the top rate down from 73 percent to 25 percent, thereby boosting the share of taxes paid by the rich from 44.2 percent to 78 percent. The Kennedy tax cuts had a similar result, dropping the top rate from 91 percent to 70 percent while raising the wealthy's (over $50,000 in the 1960s) share of the tax burden from 11.6 percent to 15.1 percent. The Reagan example of the '80s is the most spectacular, the top rate cut from 70 percent to 28 percent and the upper-income share of all tax revenues rising from 17 percent to 27 percent.
Without seizing on these arguments, Bush is in a box. A rigid commitment to budget-balance and debt-retirement makes him vulnerable to Gore's mantra that we don't "need" tax cuts. Government indeed takes too much out of the people's pockets, but more importantly it undermines our children's and grandchildren's economic futures by overburdening the economy with taxes and rejecting the low-tax, high-growth, entrepreneurial vision we need. That's the vision Bush needs to build on.
To avoid being overrun by the Gore blitz, Bush has to step up into the pocket and calmly articulate the correct arguments for cutting tax rates, which Gore can't honestly refute. Then he has to advance the ball downfield by adding to and extending his tax proposal based on the fact that circumstances have changed since he first offered them. Here's what I think he needs to answer the "class warfare" rhetoric of the left.
First, Bush must tell the American people that the only effective way to reduce the debt is to increase the size of the economy. The tax code is so economically destructive that keeping tax rates high just to retire debt retards economic growth, increases the burden of future debt and sacrifices jobs and revenues for no good economic reason.
Second, he must make it clear that the only way to save Social Security and Medicare and still ensure a continuously rising standard of living for working families is to accelerate capital formation, which demands a low-tax, pro-growth tax code. The Bush proposal to allow workers to put a portion of their payroll taxes into personal Social Security retirement accounts is part of the answer, but not all of it.
Third, Bush must explain that the only way to simultaneously boost growth, reduce debt, and save Social Security and Medicare is to fundamentally reform the federal tax system by lowering tax rates across the board and reducing the multiple taxation of work, saving and investment. And by the way, revenue will go up, not down, just as it has in every instance in history.
Just recently the Fed indicated it believes the economy can grow well over 4 percent a year without inflation, not the 2.8 percent the Clinton-Gore administration projects. Throw the pass, George W. Explain to voters that the way to sustain a higher growth path is to reduce the capital gains tax to 15 percent (Alan Greenspan would eliminate it altogether), and reduce the tax rate on saving by expanding IRAs and other private retirement accounts, such as 401(k)s and Keogh accounts, and eliminate the death tax, since dying should never be a "taxable event." Governor, believe me, the voters will line up to block for you all the way to the presidency.